Kusserow on Compliance: OIG new fraud alert: physician compensation arrangements

The Office of the Inspector General (OIG) has issued a new Fraud Alert relating to physician compensation arrangements. For many years now, both the OIG and the Department of Justice (DOJ) have considered improper compensation relationships as their number one enforcement priority and much has been written on the subject. There are certain commonalities associated with this area:

  • Virtually all the cases relating to this subject arise from whistleblowers, most using the qui tam provision of the False Claims Act (FCA).
  • It is the government’s position that all claims arising from a corrupt arrangement with physicians implicates the Anti-Kickback Statute (AKS), which are considered tainted, meaning false and fraudulent.
  • Most Corporate Integrity Agreements (CIAs) with the OIG have been predicated on DOJ settlements relating to corrupt physician arrangements.

The Fraud Alert emphasizes that physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value (FMV) for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the AKS if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of federal health care program business. As such, the OIG decided to remind physicians that they should carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.

One of the triggering factors for the new Fraud Alert was that the OIG recently reached settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements. The compensation paid to these physicians under the medical directorship arrangements are alleged to have constituted improper remuneration under the AKS for a number of reasons, including that:

  • The payments took into account the physicians’ volume or value of referrals;
  • The payments did not reflect FMV for the services to be performed; and
  • The physicians did not actually provide the services called for under the agreements.

The OIG also alleged that some of the 12 physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. Because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, the OIG alleged that the salaries paid under these arrangements constituted improper remuneration to the physicians. The OIG determined that the physicians were an integral part of the scheme and subject to civil monetary penalties (CMPs).

The OIG has also provided considerable information relating to physician arrangement in its “Compliance Program Guidance for Individual and Small Group Physician Practices” (Notice, 65 FR 59434, October 5, 2000) and report entitled “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse.” Notwithstanding the extremely high enforcement priority on this subject, most compliance officers fail to include this area in serious ongoing monitoring and auditing as called for by the OIG in their various compliance guidance documents. The reason for this reluctance arises out of the fact that arrangements with physicians generally involve either inside or outside legal counsel and compliance officers become convinced that since that is the case, the arrangements must be allowable. This is definitely not the case as is evidenced by the number of enforcement actions taken against such arrangements. With the OIG underscoring this subject, any organization that has arrangements with physicians should consider having those arrangements reviewed using an expert outside independent audit.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2015 Strategic Management Services, LLC. Published with permission.